County audit comes with questions

Sunday

Jun 23, 2013 at 4:41 PMJun 23, 2013 at 4:41 PM

By Don Reid

dwreid@aol.comCOLDWATER — Branch County received "a clean opinion" from auditors Abraham & Gaffney CPA for the 2012 fiscal/calendar year, but Commission Chairman Don Vrablic had an issue with one of three funds reported with deficits.

The fund balance increased by eight percent because the county made a one-time transfer of $625,000 from delinquent tax funds, and because it also did not make a county contribution to the employees retirement fund.

Auditor Aaron Stevens explained that under new auditing standards "management is responsible for the financial statements and the auditors are responsible for the opinions of the financial statements" that money reported is properly accounted for.

The 911 Central Dispatch fund ended last year in deficit after special expenditures, but since then posted a fund balance of more than $593,000, according to county administrator Budd Norman.

Norman said a deficit of $18,206 in the Probate Court Child Care fund would be handled internally.

The major deficit was in an account paid to the Michigan Department of Human Services (DHS) for foster child care and related services.

That deficit totaled $105,390 as of Dec. 31, 2012. Vrablic pointed out the county put in an additional in excess $130,000 out of other funding because the $369,141 in costs was more than appropriated.

With the county paying out $263,608, Vrablic said there is supposed to be 50 percent paid back by DHS.

"There’s got to be an issue somewhere," he said. "That number does not add up."

Stevens told the commission, "If there is a receivable missing, it’s not recorded" in the county books.

The auditor focused on the fund balance or reserve levels in the 2012 books. For the General Fund — the operational fund — the total increased to $2.601 million. But he said some of the money is committed to specific expenditures and not generally available, so in reality there is only $1.412 million in the general fund balance.

This is 11.9 percent of the county general expenditures, while Abraham & Gaffney recommends between 17 and 20 percent reserves "because of uncertainties."

Commissioner Dale Swift questioned why the percentage did not include all of the fund balance, like the auditors for the last three years had done?

Norman said the auditors for 2011 reported a 15-percent fund balance, but if they had excluded encumbered funds it was only 8 percent.

Stevens answered, "If it is reserved you can’t spend it" in emergencies. This is the first time in three years Abraham & Gaffney conducted the county audit.

Total general fund revenues were $10,940,967, an increase of about one percent or $156,000. Total expenditures were $10,674,283, an 11-percent decrease from the prior year "because you did not make the pension contribution."

When the John Hancock Company, which administers most county pension funds, requested 105 percent of the actuarial estimates needed to bring the county pension fund to a level to make it solvent and pay administrative costs, the commission withheld all the 2012 payments.

It has asked MERS (Michigan Municipal Employees Retirement System) what it would charge to administer county retirement and what would be required to fund current and future retirements under the fixed benefit program.

To do this, MERS required a majority of county-covered employees to agree to let them review their accounts so MERS can do its own actuarial projections using those employee John Hancock contributions. It would then tell Branch County what it would need to contribute. The commission hopes this would be substantially lower than John Hancock.

MERS will not have those figures until early fall at the soonest. It is now waiting for information from former employees who deferred their retirement, but a large majority of current employees in the program agreed to the review.

While waiting, the county is paying those employees who retired last year and those who retire this year from county funds until the system can be "trued up" when a final decision is made on continuing with John Hancock or going to MERS.

The approximately two-thirds of county employees in the pension plan pay 3 percent of the first $4,800 in gross wages and 5 percent of the remaining amount yearly. That was $1,024,875 last year or 4.6 percent of the covered payroll.

The uniformed deputies and corrections officers of the Branch County Sheriff's Office (BCSO) converted to MERS in 2004 and pay 2.5 percent of gross wages under their contract.

Bev Gerhart, whose has a law enforcement and accounting background, asked the commission "how much in the hole" Branch County was in the pension fund since John Hancock reported a deficit in 2011. She also asked out of what funds last year’s retirees were being paid.

Chairman Vrablic told her, "The answers are there but we are not going to spend 20 minutes explaining it right now. We’ll put it on our agenda for the next meeting."

Gerhart had been critical and questioned the commission last year during budget discussion which cut $1 million from the sheriff’s operation.

The auditors accepted the independent audits for Community Health Center of Branch County and the Branch County Road Commission.

The auditor will appear at the regular county meeting next Tuesday.

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